Stocks on Wall Street took a turn lower after a US government bond auction attracted soft demand and investors demanded higher yields as President Donald Trump’s big and beautiful tax programme continues to make people uneasy about the federal government’s deficit.
Meanwhile, OpenAI is buying io Products in a US$6.5 billion all-stock deal to help develop devices built for the generative artificial intelligence era.
Domestically, finance minister Nicola Willis will unveil her second budget today, with investors focused on the government’s debt programme within the tighter operating allowance.
And the shoulder earnings season continues with AFT Pharmaceuticals, Oceania Healthcare, Savor Group and My Food Bag scheduled to report today.
Rumbling markets
Stocks on Wall Street were weaker, with the S&P 500 falling 1.5% in late trading as investors digested the soft demand at the latest US government bond auction, while President Donald Trump’s proposed tax cuts legislation adds to growing unease about a widening federal deficit.
The tax legislation is estimated to add between US$3 trillion and US$5 trillion to the US$36.2 trillion debt.
The yield on 10-year US Treasuries rose 8 basis points to 4.6%, narrowing the premium on New Zealand’s equivalent yield at 4.7%. The kiwi dollar traded at 59.45 US cents as 7am in Auckland from 59.49 cents yesterday.
“Concerns about rising US debt and budget deficits has contributed to further rise in US treasury yields,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The proposed tax cuts are raising concerns from economists about the US’s fiscal position and there are signs of anxiety in the bond markets about the country’s debt burden.”
Meanwhile, OpenAI said it’s buying io Products, which was founded by early iPhone chief designer Jony Ive. The all-stock deal was reported as being valued at US$6.5 billion and will aim to develop devices specifically for generative AI.
And in Japan, US private equity giant Blackstone wants to expand its private asset funds targeted at high-net individuals in the world’s fourth biggest economy.
Where there’s a Willis
Domestically, finance minister Nicola Willis will unveil her second budget today, having signalled a tighter operating allowance given the ructions facing the global economy while retaining the expectation to return to a small surplus by the 2029 fiscal year.
“Market attention will centre on the updated bond programme and particularly the gross issuance for 2025/26, which was forecast at $40 billion at the half year update in December,” BNZ’s Ritson said.
Traders have been paring back their expectations for lower interest rates this year, with 62 basis points of reductions priced in for New Zealand’s official cash rate by November, implying an expectation for at least two more cuts and an outside chance for a third. The Reserve Bank will review policy next week and is expected to cut the OCR a quarter-point to 3.25%.
Changes to KiwiSaver settings have also been mooted, with speculation employee contribution rates might be raised and the government’s contribution means-tested.
Australian futures are pointing to a 0.8% decline for the S&P/ASX 200 index today, following the weak lead from Wall Street. Reserve Bank of Australia deputy governor Andrew Hauser is scheduled to deliver a speech reflecting on a recent trip to China.
On this side of the Tasman, earnings are scheduled from AFT Pharmaceuticals, Oceania Healthcare, Savor Group and My Food Bag, while dual-listed Ventia Services will hold its annual meeting.
And Auckland department store Smith & Caughey’s yesterday announced it will close its doors in July, after a rescue attempt last year ultimately failed.
Reporting by Paul McBeth. Image from Denys Nevozhai on Unsplash.
